Who Are They Kidding?

[Andy the Actuary]

Does Anyone Really Believe?

I have two plans each with 100 pensioners. The first plan covers the United Amalgamation of Coal Miners and Asbestos workers and the lump sum option is unavailable even for de minimis benefits -- i.e., everyone takes a pension. The second plan covers the employees of the National Academy to Promote Nonsmokiing, Aerobics, and Organic Foods and it offers an optional lump sum.

So by adding the complexity of pre-retirement/post-retirement perennially changing one-size-fits-all multigenerational projected and setback mortality tables makes this country a better place to retire? It is of note that somewhere along the way unisex mortality tables for lump sums will released which would obviate any hope that mortality could become representative in virtually any situation.

[Ron Snyder]

IRS has been wanting to control all actuarial assumptions and methods, including interest rates, cost method, mortality, turnover, salary projections, ever since the mid-1980s. They finally succeeded in getting Congress on board.

If IRS were drafting ERISA, rather than requiring that an EA certify DB valuations, they would simply require that everyone use their valuation software that does everything their way.

[Guest mjb]

Do you wonder why DB plans are not good retirement vehicles? Can lump sums be calculated with any accuracy under the PPA rules?

[Andy the Actuary]

Under current law, we can use stability period of the Plan year and 5-month lookback. So, if a Plan terminates now and can anticipate making distributions in 2008, we can determine lump sum amounts.

But, under new law, as I understand, lump sum rate depends upon the month of distribution, so now we're into guessing by postulating interest rate and tolerance -- e.g., 5.00, [4.00% <---> 6.00%]